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Decline Among Beer Drinker & Smokers

November 17, 2010
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In past recessions smokers and beer drinkers kept puffing and drinking. This time it could be different. The downturn and associated austerity measures may actually be accelerating a long term decline in both bad habits in the developed world, raising pressure on the two industries to innovate.

For example <a href="http://www.cigs4girls.com/">cigarettes</a> sales in developed countries are affected by price, and price is mainly driven by taxes, something austerity-minded governments are busy rising.

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"They will look at tobacco as an easy way to tax, much as they would look at the alcohol industry," declared RBS analyst Robbie Aitken.

It is important to add that beer sales in Europe and North America rose in the temporary recession of 2001 and 2002 for both Heineken and Interbrew, the predecessor of Anheuser-Busch InBev, prompting AB InBev's finance Chief Felipe Dutra to remind investors of beer's status as "cheap entertainment" in a 2008 presentation.

But last year, the world's top four brewers all sold less beer than in 2008. Volumes in Europe and North America have dropped particularly sharply.

In some countries with a bar drinking culture, consumers have opted en masse to drink at home. Britain's Punch Taverns announced this year plans to sell more pubs as it struggles to keep them profitable. This is not necessarily a negative for brewers, but third-quarter results show they also have problems that are a direct result of economic hardship.

Heineken added that weak consumer sentiment and austerity measures led to poor third-quarter trading in the Netherlands, Greece, Italy and Spain, parts of Eastern Europe and especially Britain.

AB InBev, with almost half the U.S. market, has noted that drinking has tailed off in key demographic, young males who have been disproportionately hit by the financial crisis.

Tobacco companies are facing the full force of the downturn. Recessions have not always limited smoking <a href="http://www.cigs4girls.com/buy-cigarettes/winston">cheap cigarettes</a> in the past, but spiraling taxes on the habit are now turning smokers off, or at least sending them in search of a cheaper option.

International tobacco analyst Don Hedley, adding that tax increases, smoking bans and health warnings mean official consumption typically falls 1-2 percent per year in the developed world.

British American Tobacco said in October the current downturn was having an impact that showed no signs of abating. But in Japan, BAT expects the market to fall by about one fifth next years.

Even in the European Union <a href="http://www.cigs4girls.com/buy-cigarettes/classic">tobacco</a> sales fell 5.5 percent in the first nine months of 2010, mainly due to declines in Greece, Poland and Spain, Philip Morris International said.

The company blamed tax rises, some imposed as part of austerity measures. Meanwhile BAT and Imperial Tobacco say they are increasingly losing smokers to black market producers.

Emerging economies and new product lines are the most obvious source of much needed growth for both brewers and tobacco companies.